LPG imports from US surge at higher cost as Mideast supply falters

Unlike fuel oils and liquefied natural gas (LNG), liquefied petroleum gas (LPG) is not in short supply, as Bangladeshi companies have shifted from their traditional Middle Eastern suppliers to the United States, importing more than the country's monthly requirement in March.

According to Bangladesh Energy Regulatory Commission (BERC) Chairman Jalal Ahmed, imports reached 1,83,000 tonnes in March, exceeding the monthly demand for around 1,50,000 tonnes. Nearly 70% of the supply came from the US market, with about 20% sourced from Oman.

However, US-origin LPG has come at a significantly higher cost. The ongoing Middle East war has triggered one of the most severe energy supply disruptions in decades, with damage to production facilities and the closure of the Strait of Hormuz halting a substantial share of regional exports that previously accounted for around 30% of global seaborne LPG trade.

The disruption has already fed into domestic prices. The BERC has raised retail LPG prices by Tk32.30 per kg for April, pushing the cost of a 12-kg cylinder up by Tk387 to Tk1,728, effective from Thursday evening.

The BERC chairman told TBS that they have hiked the April retail price significantly because of a jump in Saudi Aramco's contract price or CP and he will talk to the importers on the freight costs next week.

Saudi Aramco raised its April official contract price (CP) for propane by $205 per tonne to $750 and for butane by $260 to $800. LPG is made by mixing propane and butane. CP is the monthly benchmark set by Saudi Aramco, while the additional premium reflects freight, supplier margins and heightened risk.

Industry insiders say import costs have surged sharply as companies shift to longer, costlier US supply routes. LPG cargoes from the US are now costing around CP+$200 per tonne, compared with CP+$100-$120 for supplies from Iraq, Bahrain, Oman, the UAE and Saudi Arabia before the war began on 28 February.

For Bangladesh, the shift away from the Gulf has been particularly costly. Shipments from the US Gulf take 40-45 days to reach the Bay of Bengal, compared with about two weeks from Middle Eastern suppliers, significantly increasing freight costs.

"Many companies were unable to import LPG after their LCs were cancelled following force majeure declarations by Middle Eastern suppliers," said Humayun Rashid, managing director and CEO of Energypac Power Generation PLC and vice-president of the LPG Operators Association of Bangladesh (LOAB).

He said companies such as Omera, Jamuna, Aygaz, Petromax, Delta and BM are continuing imports from the US despite higher costs.

Mohammed Amirul Haque, managing director of Delta LPG Limited and president of LOAB, said Bangladesh previously depended almost entirely on the Middle East, with about 60% of imports coming from Iraq's Basra.

"Those sources have effectively disappeared due to the war," he said. "Only companies with term contracts with US suppliers can import now, as the spot market has become highly volatile."

Despite the disruption, imports have so far remained relatively steady. Bangladesh brought in around 1,50,000 tonnes in January, 1,70,000 tonnes in February.

Part of the supply is now being routed through intermediaries. Thailand's Siam Gas is supplying Bangladeshi companies by sourcing cargoes from the US, shipping them to India's Dhamra Port, and then distributing them into Bangladesh. The company also uses European routes, sourcing LPG from Azerbaijan and redistributing via the Port of Amsterdam.

Tanzeem Chowdhury, chief executive officer of Omera LPG, the country's largest operator, said the majority of LPG in March came from the USA. He also hopes there will be no shortage of LPG, as it can be supplied from multiple sources.

But his concern is with the demand shrinkage. "Demand will decline in rural areas because of a significant hike in prices," Tanzeem told TBS.

Bangladesh consumes around 1.5 million tonnes of LPG annually, with about 95% of it imported, making it highly vulnerable to global supply shocks. There are 29 LPG operators in the country, but only half a dozen are actively engaged in business.